'Merger Monday' signals shift in UK deal trends

The cross-border takeover has arrived, analysts said in the wake of the £25bn
takeover flurry that gripped the London Stock Exchange last week.

The deal frenzy on ‘Merger Monday’ involved some of the UK’s largest listed
groups.

O2 received a £17bn bid from Spanish telecoms group Telefonica, Vodafone
announced its intention to sell its Swedish business for £670m, and P&O was
in discussions with UAE group Dubai Ports World. Glass maker Pilkington also
received a prospective £2bn bid from Japan’s Nippon Sheet Glass.

David Brooks, head of M&A at Grant Thornton, said the flood of deals
showed global transactions were now a mainstay of the UK deal market.

‘Cross-border M&A is becoming a much more regular feature of M&A
involving UK companies, accounting for 41% of all deal numbers and 72% of all
deal values for the first three quarters of 2005,’ he said.

Statistics from the ONS have suggested that the appetite for UK acquisitions
by foreign companies has been building for some time.

Numbers compiled in the third quarter of 2004 showed acquisitions in the UK
by foreign companies totalled £5.7bn, trailing the value of domestic UK deals by
£2.4bn and the value of UK acquisitions abroad by £4.1bn.

One year on and the Q3 figures tell a different story. Foreign company
buyouts of UK firms now total £12.3bn – more than domestic deals of £7.2bn and
the £7.8bn value of UK acquisitions made abroad.

The growth of multinational transactions has also had an effect on the types
of deals that foreign groups pursue. The size of the bids made for O2, P&O
and Pilkington indicate that large strategic purchases are preferred to smaller
acquisitions

‘The raft of M&A deals involving foreign bidders is a clear sign that
foreign investors and UK corporates alike are looking at bigger deals and
considering serious transformational moves, not just tinkering with small
bolt-on acquisitions,’ Brooks said.